Most financial risk modelers (like most scientific modelers) attempt to develop models that are as simple as possible while still remaining useful. This said, models can become too simple thereby losing their signalling power. This circumstance can leave a risk manager without guidance as to what material risks a financial institution may be exposed. As financial markets, financial securities and regulations have proliferated, trading off simplicity and complexity becomes a particularly difficult challenge for financial risk modelers. This presentation introduces some thoughts and raises questions with respect to how a risk modeler decides when a risk model is too simple. This discussion will lean toward more practical (as opposed to theoretical) considerations.
- Start date: 2016-01-19 11:00:00
- End date: 2016-01-19 12:30:00
- Venue: 639 Evans Hall at UC Berkeley
- Address: 639 Evans Hall, Berkeley, CA, 94720